A proposed new refinery on Canada’s West Coast may have the solution to the problems of shipping Alberta oil sands dilbit by pipeline to American and Asian markets.

Source: Pacific Energy Future.

Diluted bitumen, known as dilbit, contains 30 per cent diluent that has to be added by the producer before the product is shipped by pipeline and then stripped by the refinery at the other end. That means almost one-third of dilbit is a product with no value. It also means that dilbit can sink if spilled into cold rivers – think Enbridge’s huge 2010 release into Michigan’s Kalamazoo River – and oceans, which is a principal complaint of opponents.

After President Barack Obama’s rejection of the 830,000 b/d Keystone XL pipeline proposal late in 2015, and the serious difficulties experienced in British Columbia by Enbridge (Northern Gateway) and Kinder Morgan (Trans Mountain Expansion) pipeline projects, shipping oil sands bitumen to market has become a significant issue for Canadian energy companies.

Not to mention Texas Gulf Coast refineries that were hoping to buy supplies of the heavy crude oil (Canada currently provides only about 10% of that market, even though it dominates American crude imports at 45%).

But what if bitumen could be shipped in a near-solid state? And shipped not only safer, but possibly cheaper as well?

Neatbit by rail may be much safer than oil by rail, according to Jacques Benoit of Pacific Energy Future.

According to Canada’s National Energy Board, oil by rail exports to the US rose dramatically from to 15,980 b/d in 2012 116,215 b/d in 2014, though still a small percentage of the volume transported by pipelines. Just over 3 million b/d is exported to the United States, according to the NEB.

But oil sands production is slated to rise by several million b/d over the next decade or two (the timing is more uncertain after a number of projects were delayed due to low oil prices in 2015). How will that product get to market?

Is neatbit an alternative to new pipelines?

Pacific Future Energy is proposing to build a 216,000 b/d refinery in northwestern BC that would receive its feed stock from Alberta by special rail cars designed to hold and heat bitumen, which would be heated to around 80C for pumping. The rail cars would be steam heated and insulted to keep the bitumen warm for its 600 mile (1,000 kilometres) trip across the Rocky Mountains.

Jacques Benoit.

Jacques Benoit, chief operating officer of Pacific Future Energy, says shipping “neatbit,” as the industry calls the goo with the consistency of peanut butter, is far safer than transporting dilbit by pipeline.

“If there were to be an accident, if there was a crack in the railcar, the neatbit would fill that crack and prevent product from coming out,” he said in an interview with American Energy News.

“As soon as the neatbit hits the air at 20C it becomes a near solid again. Compare it to lava coming out of a volcano, as soon as the lava hits the air it solidifies. That’s similar to this product.”

If the neatbit should somehow escape the railcar after a derailment, clean up crews would be using a backhoe instead of vacuum trucks or skimmers, says Benoit.

Why aren’t more companies shipping neatbit instead of dilbit?

Benoit says there are currently 15,000 to 20,000 b/d of Saskatchewan neatbit finding its way to the Gulf Coast. Expanding on a large scale for Alberta oil sands bitumen requires additional infrastructure.

Oil sands operations near Fort McMurray are currently set up to ship dilbit by pipeline 250 to 300 miles (400 to 500 kilometres) to Edmonton. If Pacific Future Energy’s refinery proposal is approved, someone will have to build a plant to strip out the diluent and turn dilbit into neatbit.

Benoit says the cost is relatively small: “Once you add these units in place, they can last for a long time. It doesn’t add much to the overall transportation costs. And you have to remember that the neatbit is 100 per cent product because it has no diluent,” which significantly improves the shipping economics, whether to the West Coast, or the Texas refineries on the Gulf Coast that consume approximately 2.7 million b/d of heavy crude and where Canada has only a small market share compared to Venezuela or Nigeria.